G.R. No.

173979             February 12, 2007

AUCTION IN MALINTA, INC., Petitioner,

vs.
WARREN EMBES LUYABEN, Respondent.

DECISION

YNARES-SANTIAGO, J.:

Assailed in this petition for review under Rule 45 of the Rules of Court is the May 31, 2005
Decision1 of the Court of Appeals in CA-G.R. CV No. 78456, which held that venue was properly laid
before the Regional Trial Court of Bulanao, Tabuk, Kalinga (Kalinga RTC), and reversed the trial
court’s September 3, 2002 Resolution2 dismissing the complaint of respondent Warren Embes
Lubayen in Civil Case No. 511, on the ground of improper venue.

The facts show that on October 24, 2001, respondent, a resident of Magsaysay, Tabuk, Kalinga,
filed with the Kalinga RTC a complaint3 for damages against petitioner Auction in Malinta, Inc., a
corporation with business address at Malinta, Valenzuela City, and engaged in public auction of
heavy equipments, trucks, and assorted machineries. Respondent alleged that in an auction
conducted by petitioner on May 29, 2001, he was declared the highest bidder for a wheel loader
T.C.M. 75B, series no. 3309. On June 7, 2001, respondent tendered the payment for the said item
but petitioner could no longer produce the loader. It offered a replacement but failed to deliver the
same up to the filing of the complaint. Hence, respondent instituted this case to recover actual,
moral, and exemplary damages plus attorney’s fees.

Petitioner filed a motion to dismiss on the ground of improper venue. It argued that the correct venue
is the RTC of Valenzuela City pursuant to the stipulation in the Bidders Application and Registration
Bidding Agreement which states that:

All Court litigation procedures shall be conducted in the appropriate Courts of Valenzuela City, Metro
Manila.4

In a Resolution dated September 3, 2002, the Kalinga RTC held that the clear intention of the parties
was to limit the venue to the proper court of Valenzuela City and thus dismissed respondent’s
complaint on the ground of improper venue.5

Aggrieved, respondent appealed to the Court of Appeals which reversed the Resolution of the
Kalinga RTC and reinstated the complaint. The dispositive portion thereof, reads:

WHEREFORE, the Resolution appealed from is hereby REVERSED and SET ASIDE. The case is
remanded to the RTC which is ordered to reinstate plaintiff’s complaint for damages.

SO ORDERED.6

Petitioner’s motion for reconsideration was denied; hence, the instant petition.

The sole issue is whether the stipulation in the parties’ Bidders Application and Registration Bidding
Agreement effectively limited the venue of the instant case exclusively to the proper court of
Valenzuela City.

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The Court rules in the negative.

The general rule on the venue of personal actions, as in the instant case for damages7 filed by
respondent, is embodied in Section 2, Rule 4 of the Rules of Court. It provides:

Sec. 2. Venue of personal actions. – All other actions may be commenced and tried where the
plaintiff or any of the principal plaintiffs resides, or where the defendant or any of the principal
defendants resides, or in the case of a nonresident defendant, where he may be found, at the
election of the plaintiff.

The aforequoted rule, however, finds no application where the parties, before the filing of the action,
have validly agreed in writing on an exclusive venue.8 But the mere stipulation on the venue of an
action is not enough to preclude parties from bringing a case in other venues. It must be shown that
such stipulation is exclusive. In the absence of qualifying or restrictive words, such as "exclusively"
and "waiving for this purpose any other venue,"9 "shall only" preceding the designation of venue,10 "to
the exclusion of the other courts,"11 or words of similar import, the stipulation should be deemed as
merely an agreement on an additional forum, not as limiting venue to the specified place.12

This has been the rule since the 1969 case of Polytrade Corporation v. Blanco.13 It was held therein
that the clause – "[t]he parties agree to sue and be sued in the Courts of Manila," does not preclude
the filing of suits in the court which has jurisdiction over the place of residence of the plaintiff or the
defendant. The plain meaning of the said provision is that the parties merely consented to be sued in
Manila considering that there are no qualifying or restrictive words which would indicate that Manila,
and Manila alone, is the agreed venue. It simply is permissive and the parties did not waive their
right to pursue remedy in the courts specifically mentioned in Section 2 of Rule 4 of the Rules of
Court.14

The Polytrade doctrine was further applied in the case of Unimasters Conglomeration, Inc. v. Court
of Appeals,15 which analyzed the various jurisprudence rendered after the Polytrade case. In
Unimasters, we held that a stipulation stating that "[a]ll suits arising out of this Agreement shall be
filed with/in the proper Courts of Quezon City,"16 is only permissive and does not limit the venue to
the Quezon City courts. As explained in the said case:

In other words, unless the parties make very clear, by employing categorical and suitably limiting
language, that they wish the venue of actions between them to be laid only and exclusively at a
definite place, and to disregard the prescriptions of Rule 4, agreements on venue are not to be
regarded as mandatory or restrictive, but merely permissive, or complementary of said rule. The fact
that in their agreement the parties specify only one of the venues mentioned in Rule 4, or fix a place
for their actions different from those specified by said rule, does not, without more, suffice to
characterize the agreement as a restrictive one. There must, to repeat, be accompanying language
clearly and categorically expressing their purpose and design that actions between them be litigated
only at the place named by them, regardless of the general precepts of Rule 4; and any doubt or
uncertainty as to the parties’ intentions must be resolved against giving their agreement a restrictive
or mandatory aspect. Any other rule would permit of individual, subjective judicial interpretations
without stable standards, which could well result in precedents in hopeless inconsistency.17

The rule enunciated in Unimasters and Polytrade was reiterated in subsequent cases where the
following agreements on venue were likewise declared to be merely permissive and do not limit the
venue to the place specified therein, to wit:

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 1. "If court litigation becomes necessary to enforce collection, an additional equivalent (sic)
to 25% of the principal amount will be charged. The agreed venue for such action is Makati,
Metro Manila, Philippines."18

2. "In case of litigation hereunder, venue shall be in the City Court or Court of First Instance
of Manila as the case may be for determination of any and all questions arising thereunder."19

Then too, the doctrine that absent qualifying or restrictive words, the venue shall either be that stated
in the law or rule governing the action or the one agreed in the contract, was applied to an extra-
judicial foreclosure sale under Act No. 3135.20 In Langkaan Realty Development, Inc. v. United
Coconut Planters Bank ,21 where the provision on the venue employed the word "shall" to refer to
1awphi1.net

the place where the foreclosure will be held, the Court ruled that said provision "lack(s) qualifying or
restrictive words to indicate the exclusivity of the agreed forum," and therefore "the stipulated place
is considered only as an additional, not a limiting venue."22 The said stipulation reads:

It is hereby agreed that in case of foreclosure of this mortgage under Act 3135, as amended, and
Presidential Decree No. 385, the auction sale shall be held at the capital of the province, if the
property is within the territorial jurisdiction of the province concerned, or shall be held in the city, if
the property is within the territorial jurisdiction of the city concerned.23

In the instant case, the stipulation in the parties’ agreement, i.e., "all Court litigation procedures shall
be conducted in the appropriate Courts of Valenzuela City, Metro Manila," evidently lacks the
restrictive and qualifying words that will limit venue exclusively to the RTC of Valenzuela City.
Hence, the Valenzuela courts should only be considered as an additional choice of venue to those
mentioned under Section 2, Rule 4 of the Rules of Court. Accordingly, the present case for damages
may be filed with the (a) RTC of Valenzuela City as stipulated in the bidding agreement; (b) RTC of
Bulanao, Tabuk, Kalinga which has jurisdiction over the residence of respondent (plaintiff); or with
the (c) RTC of Valenzuela City which has jurisdiction over the business address of petitioner
(defendant). The filing of the complaint in the RTC of Bulanao, Tabuk, Kalinga, is therefore proper,
respondent being a resident of Tabuk, Kalinga.

The case of Hoechst Philippines, Inc. v. Torres,24 promulgated in 1978, and invoked by petitioner in
its motion to dismiss, had already been superseded by current decisions on venue. In the said case,
the Court construed the proviso: "[i]n case of any litigation arising out of this agreement, the venue of
action shall be in the competent courts of the Province of Rizal,"25 as sufficient to limit the venue to
the proper court of Rizal. However, in Supena v. De la Rosa,26 we ruled that Hoechst had been
rendered obsolete by recent jurisprudence applying the doctrine enunciated in Polytrade.

In sum, we find that the Court of Appeals correctly declared that venue in the instant case was
properly laid with the RTC of Bulanao, Tabuk, Kalinga. 1awphi1.net

WHEREFORE, the petition is DENIED. The May 31, 2005 Decision of the Court of Appeals in CA-
G.R. CV No. 78456 which reversed the September 3, 2002 Resolution of the Regional Trial Court of
Bulanao, Tabuk, Kalinga; reinstated the complaint in Civil Case No. 511; and remanded the case to
the said court, is AFFIRMED.

Costs against petitioner.

SO ORDERED.

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CONSUELO YNARES-SANTIAGO
Associate Justice

WE CONCUR: